2022 (8) TMI 1084 - HC - Income Tax

Validity of assessment u/s 153A - incriminating material found during the search or not? - HELD THAT - ITAT, upon appreciation of the documents on record, concluded that the documents referred to by the Assessing Officer as incriminating were admittedly not found from the address of the assessee. Further, upon appreciation of the material, the ITAT concluded that the said list of transfer of shares relied upon by the Assessing Officer could not be considered as an incriminating material, as it merely reflected the date, name of the transferor and transferee as well as the number of the shares. The documents did not record any unexplained investment made by the assessee. The ITAT concluded that no material was found during the course of search so as to indicate any unaccounted investment made by the assessee. The ITAT, therefore, determined that the Assessing Officer made the additions of the unaccounted investment merely on the basis of presumptions. ITAT, therefore, concluded that since no assessment was pending for the relevant assessment year 2010-11 on the date of search and no incriminating material was found during the course of search, the issue is covered in favour of the assessee by the judgment of this Court in the case of Commissioner of Income Tax vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and Principal CIT vs. Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT as well as M/s Kapis Impex LLP 2020 (7) TMI 44 - ITAT DELHI A predecessor Division Bench of this Court in Kabul Chawla (supra) has held that if no incriminating material is found during the course of the search in respect of an issue, then no addition in respect of such an issue can be made in the assessment under Sections 153A and 153C - Decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Interpretation of Income Tax appeal arising from an impugned order.
3. Validity of additions to income under Section 69B and Section 68 of the Income Tax Act.
4. Appeal against the Commissioner of Income Tax (Appeals) order.
5. Assessment based on incriminating material found during search operation.
6. Dismissal of appeal by the Income Tax Appellate Tribunal (ITAT).
7. Legal principles regarding additions in the absence of incriminating material.
8. Comparison with previous judgments related to similar cases.
9. Application of legal principles from Commissioner of Income Tax vs. Kabul Chawla and Principal CIT vs. Meeta Gutgutia.
10. Impact of pending challenge to the Kabul Chawla judgment on the present case.

Analysis:

1. The High Court condoned a delay of 177 days in filing the appeal, leading to the disposal of the application.

2. The Income Tax appeal stemmed from an order by the Income Tax Appellate Tribunal (ITAT) concerning the assessment year 2010-11 following a search and seizure operation against a company managed by specific individuals.

3. The Assessing Officer made additions to the assessee's income under Section 69B and Section 68 of the Act, which were challenged before the Commissioner of Income Tax (Appeals), resulting in the deletion of the additions.

4. The department's appeal against the CIT(A) order was dismissed by the ITAT on the grounds that the additions lacked incriminating material from the search operation.

5. The ITAT observed that no incriminating material was found during the search in relation to the assessment year under appeal, leading to the finality of the assessment for that year.

6. The ITAT dismissed the department's appeal, emphasizing the absence of unaccounted investments or incriminating material justifying the additions made by the Assessing Officer.

7. Legal principles from previous judgments were cited to support the position that additions cannot be made without incriminating material found during a search operation.

8. The ITAT referenced similar cases where the department's appeals were dismissed, indicating a consistent approach in such matters.

9. The Court applied legal principles from Commissioner of Income Tax vs. Kabul Chawla and Principal CIT vs. Meeta Gutgutia to support the dismissal of the present appeal due to the lack of incriminating material.

10. Despite a pending challenge to the Kabul Chawla judgment, the Court found no grounds to deviate from its principles in the absence of incriminating documents or materials found during the search operation, ultimately dismissing the appeal.